Qanit Khalilullah

Editorial Note: This is a rejoinder written by the authors of the book “Breaking the Trap of Debt, Inflation, Interest and Poverty”. The authors of the book are Qanit Khalilullah and Sohaib Umar. The rejoinder is in response to the review published previously. The original review can be seen here

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While we welcome serious academic engagement with our book, much of the review relies more on speculative fears, hypothetical scenarios, and defense of the existing monetary order than on objective analysis of the structural failures of the current system.

The critique repeatedly warns about the “dangers” of sovereign money creation, yet largely ignores the catastrophic and well-documented failures of the existing fractional-reserve system itself: recurring banking crises, unsustainable global debt, persistent inflation, speculative asset bubbles, widening inequality, currency debasement, and repeated taxpayer-funded bailouts. Ironically, a system that has repeatedly destabilized economies worldwide, is treated by the reviewer as the benchmark of stability and discipline.

The review also creates a misleading impression that commercial bank money creation is naturally constrained and responsible. If this were truly the case, the world would not be drowning in unprecedented levels of sovereign and private debt despite Basel regulations, prudential frameworks, and central bank supervision. The global debt explosion itself is the clearest evidence against the claim that debt-based money creation imposes meaningful discipline.

Many objections raised in the review are speculative assertions without solid empirical grounding. Hyperinflation, capital flight, investment collapse, and economic paralysis are repeatedly invoked without demonstrating why a transparent, asset and rule-based sovereign money framework would necessarily produce these outcomes, especially when the existing debt-based model has already generated chronic instability in practice.

The review is also conceptually inconsistent in describing the proposed framework as “fiat money” while ignoring that money creation under the proposed system is directly linked to the production of real goods and services. Under our proposal, money is created to facilitate real economic activity and exchange, not primarily through leveraged debt expansion disconnected from productive output. In that sense, the proposed framework is far more grounded in the real economy than the existing system.

The concern regarding GDP-linked money creation is also substantially exaggerated. Even if GDP figures were misestimated by 1%—which is very rare—this would result in only approximately 1% additional money creation under a full-reserve framework. This is negligible compared to the enormous and largely uncontrolled money creation currently undertaken by commercial banks through debt expansion under the present fractional-reserve banking system.

The suggestion that the book is merely “persuasive” and not grounded in facts is also contrary to reality. The book extensively uses empirical evidence, banking data, debt statistics, inflation trends, central bank publications, and international monetary research to support its arguments. The analysis of Pakistan’s debt burden, interest payments, monetary expansion, banking sector exposure to government debt, and inflationary dynamics is based on publicly available economic and financial data rather than rhetoric alone. The book also draws upon established monetary literature, including the Chicago Plan tradition and IMF research on sovereign money frameworks.

Most importantly, the review fails to meaningfully confront the book’s central structural and ethical question: why should private profit-driven institutions possess the power to create the vast majority of a nation’s money supply through debt? Rather than seriously addressing this issue, the critique largely defaults to defending a deeply flawed monetary order whose failures are increasingly visible globally and particularly in Pakistan. The existing system itself is undergoing a profound structural crisis. Defending it merely because alternatives involve transition challenges is neither intellectually convincing nor economically sustainable.